Financial analysts at Barclays bank have calculated that, in order to accumulate enough money for a house deposit, first-time buyers will have to save, on average, for eight years. Back in 1995, first-timers took just an average of one year to save up for a home deposit. This is why nearly two-thirds of first-time buyers now ask family for financial help; a depressed economy means that cautious lenders are asking for a deposit that averages 20% of the purchase price. In 1995, the deposit needed was just 5%.
The statistics show that although 60% of first-time home purchasers will seek financial assistance from ‘bank of mum and dad’ – only 30% will actually receive it. Of this 30%, apparently half will see the cash as a gift! Naturally, home buyers in London will take the longest amount of time to save up their deposit – more than 10 years, whilst those in the North West will take a relatively short four years and 11 months.
It’s not all bad news for first-time buyers though; the Bank of England’s Funding for Lending Scheme is having an effect. The number of first-time buyers jumped up in November 2012, with 21,700 loans being advance to first-timers. This represents an 8% rise on October and the highest monthly total since the end of 2009, except for March 2012 when the stamp duty holiday prompted a brief rise in market activity. November was also the second consecutive month where first-time buyers accounted for 41% of all home loans taken out.
The Government’s Funding for Lending Scheme has boosted lending activity by offering £60 billion worth of funds at cut-price levels to the high-street banks, on the condition that it is loaned to homebuyers and businesses. Banks have cut some mortgage rates on the back of the scheme with some two-year fixed deals being offered for as little as 1.99%. However, Council of Mortgage Lenders’ (CML) statistics show that, despite the increased level of activity, a first-time buyer still needs to typically fork out 20% for a deposit.
Sources: thisismoney.co.uk, cml.org.uk (image courtesy of thisismoney.co.uk)